Mercantilism

History of Economic Thought // Spring 2025

Prof. Santetti

marcio.santetti@emerson.edu

Beyond ethics

Beyond ethics


Heilbroner’s remaining causes for the transition to the market system:


  • Rise of the nation-state;

  • Increase in scientific curiosity;

  • Emergence of money and markets.

Age of discoveries and the nationalist spirit

Age of discoveries and the nationalist spirit


New levels of economic & political power.


The leading nations:

  • Spain;

  • Portugal.

Age of discoveries and the nationalist spirit


The new dominant activities?


  • Done by?

  • Sponsored by?


Political consequence?

Age of discoveries and the nationalist spirit


Austria above all (1684)

Phillip von Hornick (1638—1712)

Age of discoveries and the nationalist spirit

Nine rules:

  1. That every inch of a country’s soil be utilized for agriculture, mining, or manufacturing;
  2. That all raw materials found in a country be used in domestic manufacture, since finished goods have a higher value than raw materials;
  3. That a large, working population be encouraged;
  4. That all export of gold and silver be prohibited and all domestic money be kept in circulation;
  5. That all imports of foreign goods be discouraged as much as possible;
  6. That where certain imports are indispensable they be obtained at firsthand, in exchange for other domestic goods instead of gold and silver;
  7. That as much as possible, imports be confined to raw materials that can be finished at home;
  8. That opportunities be constantly sought for selling a country’s surplus manufactures to foreigners, so far as necessary, for gold and silver;
  9. That no importation be allowed if such goods are sufficiently and suitably supplied at home.

Mercantilism as a doctrine

Mercantilism as a doctrine


An early stage of capitalism

16th—18th centuries


A loose system of ideas

Symbiosis between State and business

A conscious effort to commercialize society

Mercantilism as a doctrine


Two questions:


[1] How to grow a country’s national power?

[2] How do you accumulate treasure?

Mercantilism as a doctrine


Trade as a zero-sum game

  • What does that mean?


What is a consequence of this view for economic policy?

Mercantilism as a doctrine


However…



Demand-pull inflation.

Mercantilist writings

Mercantilist writings


Who were its proponents?


Pamphletary character


Policy-focused

Mercantilist writings


Thomas Mun (1571—1641)

“Although a Kingdom may be enriched by gifts received, or by purchase taken from some other Nations, yet these are things uncertain and of small consideration. The ordinary means therefore to encrease our wealth and treasure is by Forraign Trade, wherein wee must ever observe this rule: to sell more to strangers yearly than wee consume of theirs in value” (ch. 2)

Mercantilism as a process

Mercantilism as a process


Granting of monopolies


Rise of a new social class


Consequence: Merchants become entrepreneurs.

Mercantilism as a process



Parliament vs. Crown


The focal point of the conflict between Parliament and the Crown in the struggle to supply monopoly rights concerned patents. Parliament wanted to restrain the unlimited power of the crown to grant monopoly privileges. The struggle was not over free trade versus government control but rather over who would have the power to supply economic regulations.” (Ekelund and Hebert, 2016, p. 63)

Mercantilism as a process




Rise of liberal thought

Next time: Physiocracy